By NSB.News
India is considering the creation of emergency liquefied natural gas reserves at existing LNG import terminals as part of a wider effort to strengthen the country’s energy security. The proposal would require terminal operators to expand storage capacity, while allowing them to recover the investment through higher regasification charges.
The plan has gained renewed attention after disruption to LNG shipments through the Strait of Hormuz during the Middle East conflict exposed India’s vulnerability to sudden interruptions in gas supplies. India had to impose emergency gas allocation measures earlier in 2026 after LNG shipments were disrupted, before withdrawing most of those controls once supplies normalised.
The government has examined the idea of strategic gas reserves in the past, but the high cost of creating dedicated storage facilities had prevented the proposal from moving forward. The latest approach aims to use existing LNG import infrastructure instead of building an entirely separate strategic storage network.
LNG Terminals May Be Asked to Expand Storage Capacity
Under the proposal being considered, LNG terminal operators could be required to create additional storage capacity at their existing import facilities.
The idea is to build an emergency gas buffer more quickly by expanding the storage tanks and associated infrastructure already available at LNG terminals. The operators could then recover the additional investment through an increase in the regasification tariff charged to customers using the terminals.
Regasification is the process through which LNG, transported and stored in liquid form at extremely low temperatures, is converted back into gas before being supplied through the pipeline network.
The proposed funding model could reduce the need for the government to finance, build and operate an independent strategic gas storage system. Instead, private and public-sector LNG terminal operators would undertake capacity expansion, while the cost would be distributed through terminal usage charges.
The proposal remains under discussion and the final structure, including the amount of mandatory storage and the mechanism for recovering costs, is yet to be finalised.
Hormuz Crisis Exposed India’s Gas Supply Vulnerability
The renewed push for LNG reserves follows the disruption in energy transportation through the Strait of Hormuz earlier in 2026.
The waterway is a critical route for global oil and LNG trade. The crisis disrupted LNG shipments from the Middle East and forced India to take emergency steps to prioritise natural gas supplies for key sectors. During the disruption, the government ordered gas supplies to be redirected towards priority consumers as imported LNG availability tightened.
India later withdrew the emergency natural gas supply controls after LNG shipments resumed and supply conditions improved. The restrictions had been imposed following disruptions through the Strait of Hormuz and were eased after flows from the Middle East stabilised.
The episode, however, highlighted the lack of a dedicated gas buffer that could be used during a sudden disruption in LNG imports.
Unlike crude oil, where India has been developing strategic petroleum reserve capacity, gas supply security is more difficult because LNG requires specialised cryogenic storage infrastructure.
Depleted Gas Fields Seen as Too Expensive
One option previously considered was the creation of strategic gas storage in depleted natural gas fields.
Such underground storage facilities are used in some countries to inject gas during periods of adequate supply and withdraw it during periods of high demand or emergency shortages.
However, the cost of developing this type of infrastructure in India has been a major obstacle. Policymakers are therefore examining whether additional LNG storage tanks at import terminals could provide a faster and more commercially workable alternative.
The terminal-based model would also take advantage of existing port infrastructure, LNG handling systems and regasification facilities.
By comparison, developing a new strategic storage system would require substantial investment in storage sites, pipelines and related infrastructure.
Higher Regasification Charges Could Fund the Reserves
A central part of the proposal is the cost-recovery mechanism.
Terminal operators investing in additional LNG storage could be allowed to charge higher regasification fees. This would allow the capital cost of creating the emergency buffer to be recovered gradually from terminal users rather than being fully funded directly by the government.
The model could make the proposal financially easier to implement, but higher terminal tariffs would also increase the cost of regasified LNG supplied to downstream consumers.
Industrial customers, city gas companies, power plants, refineries and other gas users could potentially face higher costs depending on how the proposed charges are structured and passed through the gas supply chain.
The government will therefore need to balance the cost of maintaining emergency reserves against the wider objective of keeping natural gas competitive for consumers.
Energy Security Back in Focus
The LNG reserve proposal is part of a broader reassessment of India’s exposure to imported energy and critical maritime supply routes.
The Hormuz disruption forced India to look for alternative energy supplies and highlighted the risks associated with concentrated dependence on particular regions and shipping routes. During the crisis, India explored alternative sources for LNG, crude oil and LPG as supplies from the Middle East came under pressure.
The government is also examining ways to strengthen buffers for other imported fuels. Reports indicate that India is considering expanding its LPG storage buffer to around 30 days of demand from a national average of about 18 days, reflecting the wider focus on energy supply resilience.
For LNG, using existing terminals could offer a relatively quicker route to creating emergency reserves.
The proposal now under consideration could mark an important shift in India’s gas security strategy—from depending primarily on supply contracts and market purchases during disruptions to maintaining a physical emergency LNG buffer within the country.
